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The producer sees a working cash bid that compliments his current marketing strategy so he decides to sell directly to the elevator's bid. This is similar to the previous example but without placing a limit order above the prevailing bid. Here, the producer simply ‘hits' the bid without placing the offer ‘above’ the elevator’s cash bid. Once the order is placed, both the cash and futures prices are executed and displayed accordingly in the Orders window. Below, the cash is filled at the prevailing elevator bid of 65.3225 335 and the futures are sold at the prevailing bid of 65.2225 0250 for December 20222023. Note, the cash transaction was for 10,000 5000 bushels, which triggers a 2 1 lot of offsetting futures to fully hedge the cash position.
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In this example, if the underlying futures were to move and cause the cash bid to update in parallel, when creating the offer a warning will display to alert you to of this change in cash bid pricing.
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If you wish to place the order, simply hit ‘Yes, Place Order’ or select ‘No’ to return to the Create New Offer modal to update any of the inputs.
Example 4: Transacting 'Odd Lot' Cash Quantities
In the examples so far, the producer has been trading in quantities of 5000 bushels, which are hedged on a 1:1 ratio with CBOT grain futures as the underlying contract unit is also 5000 bushels. When cash bushel increments of less than a standard futures contract are transacted, the Hedge Account Balances and Hedge Account Balances Details windows track these smaller unhedgeable 'tails' of bushels. In this example, the merchandiser is bid -.10 (basis) under the CBOT July Wheat 2024 futures. The bid has been created and published and is now producer facing.